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    L_Breezy's Avatar
    L_Breezy Posts: 3, Reputation: 1
    New Member
    		  
    #1

    Aug 13, 2005, 02:04 AM
    Need help with journal entries for sale of inventory
    Hey, here's the info.

    Dec. 1/04: Sold inventory for $60000. $10000 cash down payment, 20000 payable Dec. 1/05, and 30000 payable Dec. 1/06. The cost of inventory was 40000.

    Customer signed an installment note which called for interest at 12% on unpaid balance on Dec. 31 '04 and '05 and Dec. 1/06.

    Need help with the journal entries. Do I make two Note Receivables for 20000 and 30000 or do I lump into one entry for notes receivable for 50000? And how do I account for the interest at year end(which is at the end of the month)?
    Thanks for any help in advance.
    pready's Avatar
    pready Posts: 3,197, Reputation: 207
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    #2

    Mar 1, 2012, 12:40 PM
    For the sale:
    Debit Cash for 10,000
    Debit Notes Receivable - Current Portion due for 30,000
    Debit Notes Receivable - Long-term Portion due for 20,000

    For the inventory sold:
    Debit Cost Of Goods Sold for 40,000
    Credit Merchandise Inventory for 40,000

    For the interest you will have to calculate the amount of interest due, then the journal entry will be:
    Debit Interest Receivable for the amount of interest calculated
    Credit Interest Revenue for the amount of interest calculated
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